Conventional household bill payment is based on the receipt by mail of a paper statement from each service establishment for each billing period.
Households issue a multitude of paper checks and associated paper return stubs to these service establishments and the payments are cleared through banks, credited to service establishment bank accounts, and applied or credited to the household accounts on record. In this conventional system, for example, a city of 3 million households, each writing only 5 checks each month will generate more than 60 million paper transactions per month, or 720 million in a year.
Conventional payment systems are designed to handle these inefficient paper payments on a large scale, causing more efficient alternatives to actually increase costs, because they require special "exception" handling. Nevertheless, there has been substantial focus on electronic alternatives to paper checks and stubs. Typically, these electronic alternatives involve automating the consumer interface to enable the creation of electronic transactions, such as, for example, telephone bill-paying, service bureaus, automatic teller machine payment, internet-based home banking, and electronic bill presentment and payment. However, households do not easily adopt new payment systems on a large scale, and receiving service establishments generally resist the associated exception costs. While Internet-based electronic bill presentment and payment may eventually come into widespread use, to date, commercially viable alternate payment technologies have had a negligible impact on reducing the inefficiencies inherent in conventional paper-based bill payment.
Thus, what is needed is an automated household bill payment system that eliminates paper-based bill payment. The system should be easily adaptable to household use on a large scale. The system further should be low cost to service establishments. The system further should not require electronics or automation at the household point of payment. The system should readily accommodate and directly facilitate the eventual transition to full electronic bill presentment and payment over electronic networks.